Zimbabwe, which rarely receives positive coverage from South Africa, has received a major fillip with the Standard Bank of South Africa saying the country’s economy, which has been on a free fall for five years, could record positive growth as early as next year.
Central bank governor, Gideon Gono, the architect of the country’s recovery plan, hoped to realise positive real growth only in 2006. So far, his main thrust has to reduce inflation, which the World Bank has described as the greatest tax on the poor. It has so far dropped from over 600 percent In January to 395 in June, and is expected to decline to below 200 percent by the end of the year.
Zimbabwe’s gross domestic product, its total wealth, has shrunk by 30 percent over the last five years. It is expected to decline by a further four to five percent this year. It contracted by 13.7 percent in 2002, shrunk by a further 13.2 percent last year, and is expected to decline by 8.5 percent this year.
Though Standard Bank did not disclose the magnitude of the growth for next year, the International Monetary Fund (IMF) estimates it at five percent. It puts this years decline at 9.2 percent.
According to a mid-year review by Standard Bank, which through Stanbic Bank has operations in 16 countries excluding South Africa, Zimbabwe is likely to realise positive growth next year because the sharp rate of decline has been halted and the growth is now coming off a lower base.
“A return to positive growth is likely particularly if efforts to stimulate agricultural production bear fruit and are supported by a more flexible exchange rate,” the report, prepared by Robert Bunyi, of the bank’s economics research team, says.
It adds, however that overall economic performance is dependent on the economic policies of the government. “A return to macroeconomic stability will require foreign funding with which to replace expensive local borrowings and free up capital for private sector investment,” the bank says. “Further relaxation of the exchange rate regime will be necessary to fully motivate growth of the export sector.”
Several exporters have complained that the current exchange rate is too low for them to remain viable. Though the auction rate has eased to above $5 300 to the green back, which compares favourably with the black market rate of about $6 000 they were realising last year, they can only cash 75 percent of the proceeds at the auction rate while the remaining 25 percent has to be sold at the official rate of $824, thus drastically reducing the blend rate.
Zimbabwe has been off the IMF books since 1998. It was supposed to be expelled from the international bank this month because of non-payment of its arrears but was given a six month reprieve.
The Southern African nation has been in continuous arrears to the IMF since February 2001. It owed the international bank US$295 million at the end of June.
Although it has paid US$9 million this year, the IMF said this was insufficient to stabilise its arrears and advised that Zimbabwe increase its payments.
In an interview, Bunyi said the recovery of Zimbabwe’s economy would be hinged on agriculture. There were already positive signs as food supply had now improved because smallholder farmers had increased output following better rainfall and improved access to farming inputs.
Bunyi’s assessment was in sharp contrast to that of the Food and Agricultural Organisation (FAO) which says 2.3 million people will not be able to meet their food requirements with some 30-40 percent of the farmers running out of food from their own production by the end of this month.
The Standard Bank report also has a startling revelation that is likely to shock most Zimbabweans. It says ZANU-PF is expected to win next year’s crucial elections. “The ruling party, ZANU-PF, is expected to win most of the seats giving it a comfortable parliamentary majority,” the report says.
Asked how he had reached such a conclusion in view of the seeming unpopularity of the ruling party and claims by the opposition Movement for Democratic Change that it was robbed of the 2000 parliamentary elections and the 2002 presidential elections, Bunyi said his views were based on the party’s performance in the by-elections since the 2000 elections.
“We are not talking about democracy or whether the elections will be democratic or not,” he said. “If I had been talking as a social scientist, I would probably have reached a different conclusion but I am talking as an economist and I have to report the facts on the ground. What I am merely saying is that the business sector should not expect any policy change after the elections. My point is not to discuss the democratic process.”
A quick count indicates that 15 by-elections have been held since the 2000 elections. ZANU-PF has won 12 while the Movement for Democratic Change has won three.
“ZANU-PF has the advantage of incumbency and it will use this to its advantage next year,” Bunyi said.